Lionbridge Technologies Inc (LIOX)
Q1 2010 Earnings Call
May 5, 2010 9:00 am ET
Rory Cowan - Chairman & Chief Executive Officer
Don Muir - Chief Financial Officer
Sara Buda - Vice President of Investor Relations
Joseph Vafi - Jefferies & Co.
Joseph Cohen - Louis Capital Market
Kevin Liu - B. Riley & Co.
Joshua Horowitz - Unidentified Company
Bob Sales - LMK Capital Management
Previous Statements by LIOX
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I’m now turning the call over to Sara Buda, Vice President, Investor Relations. Thank you. You may begin.
Thank you. Welcome everybody to the Lionbridge investor call to discuss financial results for the first quarter of 2010. During this call we may make certain statements that maybe considered forward-looking statements under the Federal Securities laws and which involve risks and uncertainties.
Our actual future results may differ significantly from the matters discussed in any forward-looking statements. We have disclosed in greater detail in our Form 10-K filed with the Securities and Exchange Commission on March 16, 2010 the factors that may cause such differences.
Now, I’ll turn the call over to Lionbridge Chairman and CEO, Rory Cowan.
Thank you, Sara. Today I’d like to talk to you about three things; first, our positive Q1 results that really reflect the forecast affirming of our demand environment; second, our recently announced partnership with IBM; and third, we’ll talk about the progress of our software as a service business with the general availability or the formal launch of our Translation Workspace last week.
So first, let’s start with the quarter. We delivered revenue of about $101 million, and of course this exceeded our forecast as revenue from both new and existing customers continued to strengthen ahead of plan.
In addition, we grew margins year-on-year despite the unfavorable currency environment, and you may remember that the euro was about 139 averaged for the quarter versus 132 a year ago. So that’s about half our revenue is sort of euro denominated. The underlying demand strength was probably even stronger than our revenue top line really portrayed.
We delivered GAAP EPS of about $0.001 a share. In fact we grew GAAP profits by about $5.6 million or about $0.10 a share year-on-year on $12 million of incremental revenues, so almost a 50% conversion from revenue to GAAP EPS. So that was really I think our cost actions, and also just the revenue lift really beginning to show.
Finally, our cash managements remains strong. We generated positive cash flow of about 500K in Q1, and that from our chair is pretty remarkable, because usually we consume cash in Q1 and then grow throughout the year, and so this really marks our first Q1 with positive cash flow in over six years, and that’s since we’ve acquired BGS. So that feels very positive. Lastly, we ended the quarter with about $23 million in cash, so the balance sheet remains strong.
Let me touch on the demand environment that is leading us to such a strong start in the year. We drove about 14% top line growth year-on-year. Now, clearly the last year the world was ending, so it was somewhat an easy compared, but nonetheless, we did drive 14% top line growth and this reflects a couple of positive trends.
First, we are ramping our new business. We won a number of large programs of 2009 across a variety of end markets and life sciences, manufacturing and technology, and in Q1 you saw these programs begin to scale, and I expect these new customers will become even more significant as the year progress.
I do want to underscore, we shouldn’t all be swinging from the chandelier, because of the economy. There is still a sort of double approval process where we win a program, and then the individual sponsor within the business goes back for approval for the specific project under the program. So it’s a double approval process, which is sort of how we run our business here, and how everyone else is still running their businesses. But nonetheless we are seeing strengthening, and we are beginning to see quite a lot of new business.
Second, I think our large accounts are growing, and in fact if you look at our top 10 customers this quarter, and compare them to a year ago, you will see about 20% or 22% growth on those accounts year-on-year, and Google of course is one of our second large. We are a second largest customer now, so it’s growing very nicely for us as we really evolve that partnership well. So in some we are clearly seeing growth return, and we expect revenue to further accelerate in Q2 and in the second half of 2010.
Turning to our profit growth; as I mentioned our $12 million of incremental revenue, growth drove about $5.5 million of incremental GAAP profit year-on-year. I think this proves once again that there is leverage in our business, and because of our diligent cost management we are beginning to see great conversion from every incremental revenue dollar.
So in sum, not a lot more to talk about during the quarter, but I am pleased with our results and momentum we see for 2010. Now lets talk about our partnership with IBM, which is really some very big news for us in 2011, 2012 and onwards.